Question 1

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 2

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The producer surplus after this tax is

Accepted Answer

A)   $60.
B)   $45.
C)   $30.
D)   $15.E) A) and D)
F) None of the above

Question 3

What happens to the total surplus in a market when the government imposes a tax?

Accepted Answer

A)   Total surplus increases by the amount of the tax.
B)   Total surplus increases but by less than the amount of the tax.
C)   Total surplus decreases.
D)   Total surplus is unaffected by the tax.E) A) and B)
F) A) and C)

Question 4

Taxes cause deadweight losses because taxes

Accepted Answer

A)   reduce the sum of producer and consumer surpluses by more than the amount of tax revenue.
B)   prevent buyers and sellers from realizing some of the gains from trade.
C)   cause marginal buyers and marginal sellers to leave the market, causing the quantity sold to fall.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 5

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is

Accepted Answer

A)   smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax.
B)   bounded by the supply curve, the demand curve, the effective price paid by buyers, and the effective price received by sellers.
C)   a right triangle.
D)   a triangle, but not necessarily a right triangle.E) None of the above
F) A) and D)

Question 6

The government's benefit from a tax can be measured by

Accepted Answer

A)   consumer surplus.
B)   producer surplus.
C)   tax revenue.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 7

Figure 8-22 
-Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Accepted Answer

A)   increase tax revenue and increase the deadweight loss from the tax.
B)   increase tax revenue and decrease the deadweight loss from the tax.
C)   decrease tax revenue and increase the deadweight loss from the tax.
D)   decrease tax revenue and decrease the deadweight loss from the tax.E) All of the above
F) C) and D)

Question 8

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) A) and C)
F) All of the above

Question 9

If the size of a tax triples, the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 10

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Accepted Answer

Total tax revenue is...

Question 11

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Accepted Answer

A tax on energy drinks would have a larg...

Question 12

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Accepted Answer

A)   fall entirely on the buyers of fast-food French fries.
B)   fall entirely on the sellers of fast-food French fries.
C)   be shared equally by the buyers and sellers of fast-food French fries.
D)   be shared by the buyers and sellers of fast-food French fries but not necessarily equally.E) None of the above
F) A) and B)

Question 13

In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez asserted the following:

Accepted Answer

A)   Since World War II, higher tax rates on individuals with the highest incomes tend to be associated with higher rates of economic growth - not with lower rates of economic growth.
B)   The average federal income tax rate on the top 1 percent of income-earners in the United States more than doubled between 1970 and 2010.
C)   A "reasonable" increase in the tax rate on top income earners is all that is needed to solve long­term fiscal problems faced by the United States.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 14

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Accepted Answer

A)   I+Y.
B)   J+K+L+M.
C)   L+M+Y.
D)   I+J+K+L+M+Y.E) A) and B)
F) B) and D)

Question 15

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, the price buyers effectively pay is

Accepted Answer

A)   $4.
B)   $6.
C)   $10.
D)   $16.E) B) and D)
F) A) and D)

Question 16

Figure 8-21 
-Refer to Figure 8-21. Suppose the market is represented by Demand 1 and Supply 1. At first the government places a $3 per-unit tax on this good. Then the government decides to raise the tax to $6 per unit. How would you characterize the decision to raise the tax rate from $3 to $6 per unit? The decision is

Accepted Answer

A)   a good one because it increases tax revenue while decreasing the deadweight loss from the tax.
B)   a bad one because it does not increase tax revenue yet increases the deadweight loss from the tax.
C)   a bad one because it decreases tax revenue while increasing the deadweight loss from the tax.
D)   unclear because it increases tax revenue yet also increases the deadweight loss from the tax.E) A) and D)
F) B) and C)

Question 17

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Accepted Answer

The deadweight loss will be $8...

Question 18

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The per-unit burden of the tax on buyers is

Accepted Answer

A)   $3.
B)   $4.
C)   $5.
D)   $8.E) C) and D)
F) A) and C)

Question 19

Economists generally agree that the most important tax in the U.S. economy is the

Accepted Answer

A)   investment tax.
B)   sales tax.
C)   property tax.
D)   labor tax.E) C) and D)
F) A) and B)

Question 20

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The producer surplus with the tax is

Accepted Answer

A)   $3,000.
B)   $6,000.
C)   $9,000.
D)   $12,000.E) A) and D)
F) B) and C)

Exam 8: Application: The Costs of Taxation

In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez asserted the following:

Correct Answer
verified

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The producer surplus after this tax is

Correct Answer
verified

Economists generally agree that the most important tax in the U.S. economy is the

Correct Answer
verified

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Correct Answer
verified
Total tax revenue is...
View Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Correct Answer
verified

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Correct Answer
verified

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Correct Answer
verified

Correct Answer
verified

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Correct Answer
verified
A tax on energy drinks would have a larg...
View Answer

What happens to the total surplus in a market when the government imposes a tax?

Correct Answer
verified

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct Answer
verified
The deadweight loss will be $8...
View Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The per-unit burden of the tax on buyers is

Correct Answer
verified

If the size of a tax triples, the deadweight loss increases by a factor of six.

Correct Answer
verified

For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is

Correct Answer
verified

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus with the tax is

Correct Answer
verified

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Correct Answer
verified

The government's benefit from a tax can be measured by

Correct Answer
verified

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, the price buyers effectively pay is

Correct Answer
verified

Taxes cause deadweight losses because taxes

Correct Answer
verified

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez asserted the following:

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The producer surplus after this tax is

Correct AnswerverifiedShow Answer

Economists generally agree that the most important tax in the U.S. economy is the

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Correct AnswerverifiedTotal tax revenue is...View AnswerShow Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Correct AnswerverifiedShow Answer

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Correct AnswerverifiedA tax on energy drinks would have a larg...View AnswerShow Answer

What happens to the total surplus in a market when the government imposes a tax?

Correct AnswerverifiedShow Answer

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $8...View AnswerShow Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The per-unit burden of the tax on buyers is

Correct AnswerverifiedShow Answer

If the size of a tax triples, the deadweight loss increases by a factor of six.

Correct AnswerverifiedShow Answer

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus with the tax is

Correct AnswerverifiedShow Answer

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Correct AnswerverifiedShow Answer

The government's benefit from a tax can be measured by

Correct AnswerverifiedShow Answer

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, the price buyers effectively pay is

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because taxes

Correct AnswerverifiedShow Answer

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Total tax revenue is...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
A tax on energy drinks would have a larg...
View Answer

Correct Answer
verified

Correct Answer
verified
The deadweight loss will be $8...
View Answer

Correct Answer
verified

Correct Answer
verified

For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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